Key Events In This Rather Quiet Week

Next week, markets are likely to focus on key data/policy actions in DMs, including flash PMIs in the Euro area (expect a slight decline), BoE Minutes (look for signs of disagreement), and BoJ meeting (expect no change in policy).

In DMs, the highlights of the week include [on Monday] Euro area construction output, Japan Machine Orders; [on Tuesday] UK CPI inflation (expect 1.70%, same as consensus), Japan Industry Activity Index, and Australia MPC minutes; [on Wednesday] FOMC minutes, Euro area consumer confidence, and BoE minutes (disagreements could have arisen on the degree of spare capacity; our UK economists remain more dovish than consensus and expect the first hike in 3Q 2015), and BoJ meeting (expect no change in policy; we still think it could take further action in July, but given time lag in price data releases, we see growing possibility that it may wait until October [link]; and we have stressed the need to not just focus on incremental easing [link]); [on Thursday] US Markit Manuf. PMI, existing home sales, and Leading Index, Euro area PMIs (we expect composite at 53.8 vs. consensus at 54.2), Japan PMI; and [on Friday] US New Home sales, Canada CPI, Germany IFO Business Climate.

Japan | Monetary Policy Decision: Goldman does not expect any change in policy (base target at ¥270T, same as consensus and previous). Given the time lag in price data releases, there is a growing possibility that the BOJ will wait until the October Outlook Report to take additional easing action, but it could take further action at its July meeting. First, the BOJ is starting to put in place a framework for monitoring prices more or less in real time, alleviating the effects of time lags in data releases. Second, it is likely the BOJ, the Abe administration, which is due to unveil its second wave of growth strategies in June, and the Ministry of Finance, which is targeting a second hike in the consumption tax, will unite to mitigate risks.

South Africa | MP Decision: Goldman expects the repo rate on hold (at 5.50%, same as consensus and previous), on the back of the marginal easing of inflationary pressures from the recent FX market rally. Since divergence of views also occurs within the MPC, GS expects the statement to keep a hawkish tone to balance a holding decision, which effectively reflects a dovish bias.

Turkey | MP Decision: Goldman expects all rates unchanged (Benchmark Repo Rate at 10.0%, OLR at 12.0%, OBR at 8.0%). However, in the accompanying policy statement, the bank expects the bank to sound dovish and open the door to possible future easing, putting stronger emphasis on the recent compression in Turkey’s risk premium, the acceleration in rebalancing of the economy and the related slowdown in credit volumes. This is broadly in line with consensus.